McCracken et al v. Verisma Systems, Inc. et al

Filing 208

DECISION AND ORDER granting 169 Motion to Stay. Defendants motions to stay this action (ECF No. 169; ECF No. 171) are GRANTED to the extent that this case is stayed until March 31, 2020. Signed by Hon. Mark W. Pedersen on 10/27/29. (KAP)-CLERK TO FOLLOW UP-

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
__________________________________________
ANN McCRACKEN, JOAN FARRELL,
SARAH STILSON, KEVIN McCLOSKEY,
CHRISTOPHER TRAPATSOS, and
KIMBERLY BAILEY, as individuals
and as representatives of the classes,

DECISION & ORDER
14-CV-6248 FPG/MJP

Plaintiffs,
v.
VERISMA SYSTEMS, INC.,
UNIVERSITY OF ROCHESTER,
STRONG MEMORIAL HOSPITAL, and
HIGHLAND HOSPITAL,
Defendants.
__________________________________________
Preliminary Statement
Plaintiffs Ann McCracken, Joan Farrell, Sarah Stilson, Kevin McCloskey,
Christopher Trapatsos, and Kimberly Bailey, as individuals and as representatives
of the classes 1 (“Plaintiffs”), commenced this putative class action against Verisma
Systems, Inc., (“Verisma”) University of Rochester, Strong Memorial Hospital, and
Highland Hospital (“Hospital Defendants”) (collectively “Defendants”) alleging
that Defendants systematically violated New York law by manipulating charges
for medical records and by charging artificially inflated amounts to Plaintiffs and
1 On July 7, 2017, the Honorable Michael A. Telesca certified a class action under Federal
Rule of Civil Procedure 23(b)(3) and also certified two provider-level sub-classes – individuals who
requested records through Strong Memorial Hospital and individuals who requested records
through Highland Hospital after May 14, 2011. (Decision and Order (“D&O”) at 20, Jul. 27, 2017,
ECF No. 102.)

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other class members. (Second Amended Class Action Complaint (“Compl.”) at 2,
ECF No. 40.)
Verisma moves pursuant to Local Rule 7(b)(2)(B) of the Western District of
New York to stay the proceedings in this matter pending the Second Circuit’s
review of the decision of the District Court for the Southern District of New York
(“S.D.N.Y.”) in Ortiz v. CIOX Health LLC, 386 F. Supp. 3d 308 (S.D.N.Y May 7,
2019) 2, a case involving the issue of whether New York State’s Public Health Law
(“PHL”) § 18 provides a private right of action. (Verisma’s Notice of Mot., ECF No.
169; Verisma’s Mem. of Law at 1–2, ECF No. 169-1; see also Ortiz v. IOD, Inc., 17CV-4039, S.D.N.Y. (May 30, 2017), Ortiz v. IOD, Inc., No. 19-1649 (2d Cir. Jun. 3,
2019) (collectively “Ortiz”).) Defendants University of Rochester, Strong Memorial
Hospital, and Highland Hospital (“Hospital Defendants”) sought and were granted
permission to join in Verisma’s motion to stay. (Text Order Granting Mot. to Join,
ECF No. 173.) After several briefs and a letter submitted by the parties in
connection with this motion regarding the Ortiz matter, the Second Circuit
certified a question in Ortiz to the New York State Court of Appeals regarding
whether a private right of action exists under PHL § 18. (Certified Order, ECF No.
105, Ortiz, No. 19-1649 (2d Cir. Jun. 5, 2020).)
While Defendants’ motion papers sought to stay this matter pending the
Second Circuit’s decision in Ortiz, after the completion of briefing on this motion

2

IOD, Inc., is the successor to Healthport Technologies, LLC and CIOX Health, LC.

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the Hospital Defendants sought leave to file supplemental papers in which they
intended to argue why a stay is also warranted based upon new procedural
developments in Spiro v. Healthport, LLC, No. 14-CV-2921 (S.D.N.Y., Apr. 30, 2017)
and Spiro v. Healthport Technologies, LLC, No. 20-2627 (2d Cir. Aug. 3, 2020), collectively
referred to as “Ruzhinskaya..” 3 (Letter from Amanda B. Burns, Esq., to the Court

(Jul. 9, 2020), ECF No. 191.) Verisma soon joined in that request. (Letter from
Christopher J. Belter, Esq., to the Court (Jul. 10, 2020), ECF No. 193.) The Court
held oral argument on Defendants’ request for a stay based upon the Ruzhinskaya
developments rather than permitting additional briefing. Based upon the oral
argument and a review of all documents submitted in connection with this matter,
the Court grants Defendants’ motions to stay this action until March 31, 2021, as
discussed below.
Background
Plaintiffs alleged that Defendants “systematically violated New York law by
manipulating charges for medical records, and by charging artificially inflated
amounts to Plaintiffs and other Class members,” which “inflated amounts
exceed[ed] the actual cost of producing some records and include[d] built-in
kickbacks” from Verisma to the Hospital Defendants. (Compl. at 2.) Plaintiffs are
patients who requested their medical records from Defendants. Plaintiffs asserted
the following claims: (1) violation of PHL § 18; (2) unjust enrichment (separately
3 The docketed name of the case is Spiro v. Healthport Technologies, LLC. However, the
Court will refer to the case as Ruzhinskaya as that is the name of the plaintiff who filed the appeal.
(Notice of App., ECF No. 409, Spiro v. Healthport Technologies, LLC, No. 14-CV-2921 (S.D.N.Y.
Jul. 31, 2020).)

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against Verisma and the Hospital Defendants); and (3) violation of New York
General Business Law (“GBL”) § 349 et seq. (collectively against all Defendants).
(Id.) The District Court granted class certification on all three of these claims.
(D&O on Pls.’ Mot. to Certify Class at 20, ECF No. 102; see also D&O amending
ECF No. 102 to appoint counsel, ECF No. 103.)
PHL § 18 regulates the amount a health care provider can charge for copies
of a patient’s medical information. PHL § 18(2)(e). Plaintiffs assert that Verisma,
a third-party vendor that manages health care providers’ medical records,
responds to requests for such records, and produces the records, contracted with
the Hospital Defendants to provide such services. (Compl. at 5.) Plaintiffs further
assert that to obtain these contracts Verisma offered “improper kickbacks” to the
Hospital Defendants with respect to the “revenues associated with charges for
medical records” and by providing free “courtesy copies” to the providers. (Id. 5–6;
Pls.’ Mem. of Law at 2–3, ECF No. 172.) Plaintiffs contend that the amounts they
were overcharged for their medical records violate PHL § 18, GBL § 349, and
unjustly enriched Defendants. (Compl. at 2.)
Procedural History
The procedural history of this motion is somewhat complicated as it
necessarily involves two other cases originating in the S.D.N.Y. – Ortiz and
Ruzhinskaya. Notably, on September 6, 2018, this Court stayed the present action
pending the resolution of an appeal before the Second Circuit in Ruzhinskaya.
(Sept. 6, 2018 D&O, ECF No. 151.) Judge Telesca found that a stay was warranted

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because the appellants in Ruzhinskaya requested that the Second Circuit certify
two questions to the New York State Court of Appeals that could provide
clarification regarding Plaintiffs’ PHL § 18 claim. (Id. at 9–10.) That stay was lifted
on November 21, 2019. (Letter Order Lifting Stay, ECF No. 153.)
The parties have submitted numerous briefs and letters in connection with the
motions to stay. A brief summary of the cumbersome history of the pending
motions is as follows:
•

On May 5, 2020, Verisma filed a motion to stay pending the Second Circuit’s
decision in Ortiz. (ECF No. 169.);

•

On May 18, 2020, the Hospital Defendants moved to join Verisma’s motion
to stay. (ECF No. 171.);

•

Plaintiffs filed their opposition to Verisma’s motion to stay on May 19, 2020.
(ECF No. 172.);

•

The Court granted the Hospital Defendants’ motion to join Verisma’s motion
to stay on May 20, 2020. (ECF No.173.) In addition, the Court set a deadline
for Plaintiffs to respond to Defendants’ motion to join Verisma’s motion to
stay. (Id.);

•

Verisma filed its reply to Plaintiffs’ response to its motion to stay on May
26, 2020. (ECF No. 175.);

•

On May 27, 2020, Plaintiffs filed their opposition to the Hospital Defendants’
motion to join Verisma’s motion to stay. (ECF No. 176.);

•

On June 3, 2020, the Hospital Defendants made a motion for leave to file a
reply to Plaintiffs’ opposition (ECF No. 179), which the Court granted. (ECF
No. 181.);

•

In correspondence dated June 8, 2020 (electronically filed on June 9, 2020),
Plaintiffs’ counsel informed the Court that on June 5, 2020, the Second
Circuit issued an order reserving decision in Ortiz and certifying the
question of whether a private right of action exists under PHL § 18 to the
New York State Court of Appeals. (Letter from Kathryn Lee Bruns, Esq., to
the Court (Jun. 8, 2020), ECF No. 180.) Plaintiffs also requested permission
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to supplement their briefing due to the new procedural posture of Ortiz. In
addition, Plaintiffs requested permission to file a sur-reply to the Hospital
Defendants’ reply. (Id.);
•

The Court received correspondence from Verisma, dated June 9, 2020,
informing the Court of the Second Circuit’s certification and attaching the
Second Circuit’s decision regarding the same. Verisma’s correspondence also
contained substantive legal arguments. 4 (Letter from Christopher J. Belter,
Esq., to the Court (Jun. 9, 2020) at 2, ECF No.);

•

Also on June 9, 2020, the Hospital Defendants filed their reply to Plaintiffs’
opposition to the motion to join Verisma’s motion to stay. (ECF No. 183.);

•

Shortly after filing its reply on June 9, 2020, the Hospital Defendants also
filed a notice of supplemental authority, which informed the Court of the
Second Circuit’s certification of the PHL issue in Ortiz to the New York State
Court of Appeals, and which also contained substantive legal arguments.
(ECF No. 184.);

•

On June 16, 2020, Plaintiffs filed a sur-reply in further opposition of the
Hospital Defendants’ motion to stay. (ECF No. 187.);

•

In correspondence dated July 9, 2020, the Hospital Defendants informed the
Court that, on remand, the S.D.N.Y. granted summary judgement to the
hospital defendant in Ruzhinskaya, holding that there was no private right
of action under PHL § 18, and that the hospital defendant did not violate
that statute. (Letter from Amanda B. Burns, Esq., to the Court (Jul. 9, 2020),
ECF No. 191.) In addition, the District Court upheld its previous finding on
summary judgment in favor of the hospital’s release-of-information vendor
(“ROI”) with respect to the plaintiff’s claims under § 18(2)(e), unjust
enrichment, and New York GBL § 349. (Id. at 1 & Ex. A at 3–4.) The Hospital
Defendants argued that the Ruzhinskaya case is “on all fours” with the
present case. (Letter from Amanda B. Burns, Esq., to the Court (Jul. 9, 2020)
at 1, ECF No. 191.)

•

Plaintiffs responded to the Hospital Defendants’ correspondence on July 9,
2020, arguing that the present case differs from Ruzhinskaya because

While it is not this Court’s practice to consider legal arguments asserted outside of a
party’s formal motion papers, given the peculiar and complex procedural posture of this case, the
Court has considered arguments asserted in correspondence submitted by the parties. However,
the Court cautions that in the future it may choose, at its discretion, not to consider arguments not
contained in the parties’ motion papers.
4

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Plaintiffs have asserted a claim involving a kickback scheme. (Letter from
Kathryn Lee Bruns, Esq., to the Court (Jul. 9, 2020), ECF No. 192.)
•

Defendant Verisma filed a letter on July 10, 2020, in which it agreed with
the Hospital Defendants that a stay is warranted in this case because
Ruzhinskaya “addresses key issues regarding the interpretation and
application of PHL § 18.” (Letter from Christopher J. Belter, Esq., (Jul. 10,
2020), ECF No. 193.)

•

The Court held oral argument on the motions to stay on July 23, 2020,
during which counsel for all parties was present and interposed arguments.

•

On August 3, 2020, the Hospital Defendants informed the Court that, after
the S.D.N.Y. granted summary judgment to the hospital defendant and ROI
provider in Ruzhinskaya, the plaintiffs in that case appealed the final
judgment to the Second Circuit. (Letter from Amanda B. Burns, Esq., to the
Court (Aug. 3, 2020), ECF No. 196.)

•

In correspondence dated October 26, 2020, the Hospital Defendants wrote
to inform the Court of recent developments in Ruzhinskaya v. HealthPort
Technologies, LLC, No. 20-2627 (2d Cir. 2020), including the plaintiff’s
motion to certify three questions to the New York State Court of Appeals in
that case, the defendants’ opposition to that motion and cross-motion for a
stay, and the plaintiff’s non-opposition to the stay. (Letter from Amanda B.
Burns, Esq., to the Court (Oct. 26, 2020), ECF No. 206.);

•

Finally, Plaintiffs responded to the Hospital Defendants on October 26,
2020, reiterating that neither Ortiz nor Ruzhinskaya would be completely
dispositive of the present case and that the prejudice caused by the delay of
awaiting a resolution of those cases “would be difficult to overstate.” (Letter
from Kathryn Lee Bruns, Esq., to the Court (Oct. 26, 2020) at 1, ECF No.
207.)
Discussion
“It is well settled that district courts have the inherent power, in the exercise

of discretion, to issue a stay when the interests of justice require such action.”
Travelers Cas. & Sur. Co. of Am. v. DiPizio Const. Co., 103 F. Supp. 3d 366, 369–
70 (W.D.N.Y. 2015) (citation omitted); see Landis v. North Am. Co., 299 U.S. 248,

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254 (1936) (“The power to stay proceedings is incidental to the power inherent in
every court to control the disposition of the causes on its own docket with economy
of time and effort for itself, for counsel, and for litigants.”).
A stay is warranted because the resolution of issues in Ortiz and/or
Ruzhinskaya could provide clarification on key issues in this case and
simplify other issues.
Ortiz v. CIOX Health, LLC
On June 5, 2020, the Second Circuit certified the following question to the
New York State Court of Appeals: Does Section 18(2)(e) of the New York Public
Health Law provide a private right of action for damages when a medical provider
violates the provision limiting the reasonable charge for paper copies of medical
records to $0.75 per page? (Certified Order at 11–12, ECF No. 105, Ortiz, No. 191649 (2d Cir. Jun. 5, 2020).)
Verisma argued that the Second Circuit (in conjunction with the New York
Court of Appeals), will ultimately resolve the present dispute, stating that
“[r]egardless of whether the certified question does not dispose of all [of Plaintiffs’]
claims, the Second Circuit’s decision specifically states that it will address any
remaining issues after the certified question is answered.” (Letter from
Christopher J. Belter, Esq., (Jun. 9, 2020) at 1–2, ECF No. 182.) The Hospital
Defendants assert that the Court of Appeals’ decision on the certified question will
be fatal to all of Plaintiffs’ claims. (Notice of Supp. Auth. at 2, ECF No. 184.)

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Ruzhinskaya v. Healthport Technologies, LLC
On March 14, 2018, the S.D.N.Y. granted summary judgment in favor of
Healthport Technologies, LLC (“Healthport”), an ROI, on plaintiff Ruzhinskaya’s
claims for violations of PHL § 18, GBL § 349, and unjust enrichment. (Opinion &
Order, ECF No. 358, Ruzhinskaya, No. 14-CV-2921 (S.D.N.Y. Mar. 14, 2018).)
Ruzhinskaya appealed to the Second Circuit on April 11, 2018. (Notice of App.,
ECF No. 360, Ruzhinskaya, No. 14-CV-2921 (S.D.N.Y. Apr. 11, 2018).) Ultimately,
the Second Circuit remanded the case back to the district court to add Beth Israel
Medical Center (“Beth Israel”), a hospital, as a defendant because it was an
indispensable party and to “adjudicate the case to a final judgment.” (USCA
Opinion at 2, ECF No. 362, Ruzhinskaya, No. 14-CV-2921 (S.D.N.Y. Nov. 1, 2019).)
On July 7, 2020, Beth Israel moved for summary judgment and the district court
granted the motion, reinstating its previous grant of summary judgment to
Healthport. (Opinion & Order at 10, ECF No. 407, Ruzhinskaya, No. 14-CV-2921
(S.D.N.Y. Jul. 7, 2020).) Ruzhinskaya filed an appeal to the Second Circuit on July
31, 2020. (Notice of App., ECF No. 409, Ruzhinskaya, No. 14-CV-2921 (S.D.N.Y.
Jul. 31, 2020).) On October 8, 2020, Ruzhinskaya moved to have the three
questions certified to the New York State Court of Appeals. (Mot. to Certify
Questions at 6, 10, ECF No. 24-2, Ruzhinskaya, No. 20-2627 (2d Cir. Oct. 8, 2020).)
On October 19, 2020, Appellee-Defendant Beth Israel filed an opposition to
the motion to certify the three foregoing questions, and also filed a motion to stay
the appeal pending the determination of the certified question presented to the

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New York State Court of Appeals by the Second Circuit in Ortiz. (Opposition to
Mot., ECF. No. 28, Ruzhinskaya, No. 20-2627 (2d Cir. Oct. 19, 2020); Mot. to hold
appeal in abeyance at 1, ECF. No. 30-1, Ruzhinskaya, No. 20-2627 (2d Cir. Oct. 19,
2020).) Plaintiff did not oppose Defendants’ motion to stay, acknowledging that the
New York State Court of Appeals’ decision in Ortiz on the certified question “could
be dispositive” in that case. (Non-Opp’n to Mot. at 2, ECF No. 37, Ruzhinskaya,
No. 20-2627 (2d Cir. Oct. 21, 2020).)
Defendants have established their burden of the need for a stay.
“The person seeking a stay bears the burden of establishing its need. Absent
a showing of undue prejudice upon defendant or interference with his
constitutional rights, there is no reason why plaintiff should be delayed in its
efforts to diligently proceed to sustain its claim.” Louis Vuitton Malletier S.A. v. LY
USA, Inc., 676 F.3d 83, 97 (2d Cir. 2012) (internal quotation and editorial marks
and citations omitted). In making the decision to grant or deny a motion to stay,
courts consider five factors: (1) the private interests of the plaintiffs in proceeding
expeditiously with the civil litigation as balanced against the prejudice to the
plaintiffs if delayed; (2) the private interests of and burden on the defendants;
(3) the interests of the courts; (4) the interests of persons not parties to the civil
litigation; and (5) the public interest. Travelers Cas. & Sur. Co. of Am., 103 F. Supp.
2d at 370 (citations omitted). Finally, where the possibility looms that the stay
will damage the interests of others, “the movant must make out a clear case of

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hardship or inequity in being required to go forward.” LaSala v. Needham & Co.,
399 F. Supp. 2d 421, 427 (S.D.N.Y. 2005) (internal quotation omitted).
With respect to the first factor — the private interests of Plaintiffs in
proceeding expeditiously with the civil litigation as balanced against the prejudice
to Plaintiffs if delayed — the Court finds that this factor weighs in favor of staying
this action. Plaintiffs assert that they will be prejudiced by the delay caused by
awaiting a decision in Ortiz, particularly because the Second Circuit has certified
a question to the New York State Court of Appeals. (Pls.’ Mem. of Law at 16; Pls.’
Sur-Reply Mem. of Law at 6, ECF No. 187.) Of course, some prejudice to Plaintiffs
is inherent in any delay, but delay alone is insufficient to prevent a stay. Spread
Spectrum Screening LLC v. Eastman Kodak Co., 277 F.R.D. 84, 88 (W.D.N.Y. 2011)
(citing Bausch & Lomb Inc. v. Alcon Labs., Inc., 914 F. Supp. 951, 953 (W.D.N.Y.
1996) (proceeding with the litigation could waste “time, resources, and significant
efforts,” whereas a stay causes only minimal prejudice and “promote[s] judicial
economy”)). However, acknowledging that that delay alone is not sufficient to
establish prejudice, Plaintiffs have asserted several other grounds in support of
their claim that they will suffer prejudice if a stay is granted.
Plaintiffs argue that neither Ortiz nor Ruzhinskaya will be dispositive of
Plaintiffs’ entire case as they have asserted independent claims for a violation of
GBL § 349 and unjust enrichment premised upon their allegation of unlawful
kickbacks. (Pls.’ Mem. of Law at 3, 12–13; Letter from Kathryn Lee Bruns, Esq.,
to the Court (Jul. 9, 2020), ECF No. 192.) They assert that this case is now over six

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years old, has been through numerous iterations of dispositive motions made by
Defendants (which were all, for the most part, denied) and a previous stay of
fourteen months that did not result in any change in the law. (Pls.’ Mem. of Law
at 1, 16–17.) In addition, Plaintiffs contend that their damages continue to grow
as time progresses. (Id. at 19.) Plaintiffs further assert that they will suffer
prejudice if the stay is granted because they will be required to incur expenses to
update their expert report for the third time. (Id. at 9 n. 8, 18, 19; Pls.’ Sur-Reply
Mem. of Law at 6.) Finally, Plaintiffs assert that fact and expert discovery is closed,
the case is close to trial, and staying the case yet again at this procedural juncture
is prejudicial. (Id. at 15; Am. Scheduling Order at 2, ECF No. 170; Parties’ joint
req. for extension of dispositive mot. deadline, “So Ordered,” ECF No. 205.)
Defendants also correctly state the law that prejudice based on the grounds
that the case will be further delayed is not sufficient to stay an action. (Verisma’s
Mem. of Law at 7, ECF No. 169-1; Verisma’s Resp. Mem. of Law at 1, 6, ECF No.
175; Hosp. Defs.’ Reply Mem. of Law at 6, ECF No. 183.) In addition, both Verisma
and the Hospital Defendants assert that since the plaintiffs in the case of Carter
v. CIOX Health, LLC, No. 14-CV-6275 (FPG)(MWP) (W.D.N.Y. May 20, 2014)
consented to a stay, a stay is warranted here because Plaintiffs have essentially
admitted in Carter that there would be no prejudice suffered due to a stay.
(Verisma’s Mem. of Law at 8; Hospital Defs.’ Mem. of Law at 1, ECF No. 171-3.)
Defendants claim this is the case because Carter involves very similar claims to
the case at bar and has the same counsel representing Plaintiffs.

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The Court finds that Plaintiffs have sufficiently alleged prejudice such that
this factor weighs against a stay. However this prejudice is lessened by a review of
the Second Circuit’s docket in Ortiz, which reveals that all briefs should now be
submitted to the New York State Court of Appeals and oral argument should be
forthcoming. (Letter from N.Y.S. Ct. of App. to counselors at 2 (Jun. 23, 2020), ECF
No. 109, Ortiz, No. 19-1649 (2d Cir. Jun. 25, 2020).) The Court of Appeals’ decision
will likely resolve the issue of whether there exists a private right of action under
PHL § 18, which will have a significant impact on this case.
Moreover, the parties in Ruzhinskaya have recently consented to staying
that action based upon the outcome in Ortiz, with the plaintiffs in that case
acknowledging that the resolution of whether or not there exists a private right of
action under PHL § 18 could be dispositive in that case. (Non-Opp’n to Mot. at 2,
ECF No. 37, Ruzhinskaya, No. 20-2627 (2d Cir. Oct. 21, 2020).) 5

Plaintiff in Ruzhinskaya asserted claims for violations of PHL § 18 and GBL § 349, as well
as an unjust enrichment claim. However, it appears from a review of the proceedings that the
S.D.N.Y. believes that these claims are intertwined, with the main claim being the violation of the
PHL. Pursuant to a motion for summary judgment made by Healthport, the ROI, the court found
that an ROI is not subject to PHL § 18, and that it did not take on the duty to limit is charges to
requesters to its own “costs incurred.” (Op. & Order at 26, ECF No. 358, Ruzhinskaya, No. 14-CV2921 (S.D.N.Y. Mar. 14, 2018).) The court also found that the plaintiffs could not sustain a claim
for a violation of GBL § 349 because the court already determined that Healthport was allowed to
charge more than its cost and it was, therefore, not unlawful under PHL § 18. (Id. at 30.) Finally,
the court granted judgment in favor of Healthport on plaintiff’s unjust enrichment claim, explaining
that since Healthport was not limited regarding what it could charge under PHL § 18, it had not
engaged in any “unjust” practice in turning a profit for charging records requesters more than its
own costs. Id. at 29. However, plaintiff then appealed the case to the Second Circuit, which
ultimately remanded the case to the S.D.N.Y. to add the hospital defendant, Beth Israel, and to
bring the case to a final resolution. Beth Israel then moved for summary judgment and the S.D.N.Y.
reinstated all of its findings with respect to Healthport and granted judgment in Beth Israel’s favor.
With respect to Beth Israel, the court found that PHL § 18 does not provide a private right of action,
that Healthport’s 75 ¢ per page charge imposed on requesters should be treated as a “cost incurred”
5

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With respect to the stay in Carter, Plaintiffs have convinced this Court that
there are procedural differences and strategic reasons present in that case that
justified staying that matter, but that do not apply to the present case. Plaintiffs
consented to the stay in Carter because the parties had been engaging in
settlement discussions. (Dec. at 1–2, ECF No. 172-1; Pls.’ Resp. at 6, ECF No. 176.)
Further, and importantly, the Carter case is still in the discovery phase, the class
has not been certified, and no dispositive motions have been made, unlike the
present case where the class has been certified, Defendants have made several
dispositive motions, and Plaintiffs have twice provided their expert disclosure to
Defendants. (Id.; Pls.’ Resp. at 6–7, ECF No. 176.) Finally, Plaintiffs assert that
they would incur even further costs to provide an updated expert report if this
matter was stayed, which is not a concern in the Carter case. (Pls.’ Resp. at 7.) In
sum, the Court finds that the plaintiffs’ consent to a stay in Carter was not an
admission that Plaintiffs would not suffer prejudice in this case if stayed. Indeed,
it could not given that the cases were commenced by two separate sets of plaintiffs
who have decision-making authority regarding how they wish to proceed
regardless of what their counsel may recommend.
With respect to the second factor — the private interests of and burden on
Defendants — the Court finds that this factor weighs in favor of staying this action.
Verisma claims that it will suffer prejudice if a stay is not granted because it will

to Beth Israel, and that the plaintiff’s GBL § 349 claim was duplicative of plaintiff’s PHL claim.
(Op. & Order, ECF No. 407, Ruzhinskaya, No. 14-CV-2921 (S.D.N.Y. Jul. 7, 2020).)

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necessarily incur costs in litigating or relitigating the PHL § 18 claim that could
end up being dismissed. (Verisma’s Mem. of Law at 8–9; Verisma’s Resp. Mem. of
Law at 7.) Likewise, the Hospital Defendants assert that they will suffer
“considerable prejudice” if the stay is not granted in the form of incurring
substantial costs to continue to litigate the case when they believe the Ortiz and/or
Ruzhinskaya cases will resolve this matter in its entirety. (Hosp. Defs.’ Mem. of
Law at 3; Hosp. Defs.’ Reply Mem. of Law at 4–5.) The Hospital Defendants also
assert that a stay to avoid what they term “needless expenditures” in connection
with this case is particularly appropriate in light of the COVID-19 pandemic,
which has created financial hardship for them. (Hosp. Defs.’ Reply Mem. of Law at
4.)
In response, Plaintiffs assert that Defendants will not suffer prejudice if the
stay is not granted because Plaintiffs’ claims under GBL § 349 and for unjust
enrichment will survive even if their PHL claim is rendered moot. For this reason,
Plaintiffs contend that Defendants would still be required to incur litigation
expenses for expert discovery, dispositive motions and a potential trial. (Pls.’ Mem.
of Law at 17; Pls.’ Resp. Mem. of Law at 3; Pls.’ Sur-Reply Mem. of Law at 6.)
The Courts finds that Defendants have established that a stay will be
burdensome and/or against their interests. At this point, the parties have
essentially completed discovery, including expert depositions, and have agreed on
a dispositive motion deadline in mid-December 2020. (Parties’ joint req. for
extension of non-dispositive mot. deadline, “So Ordered,” ECF No. 203.) Should

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Defendants choose to move for summary judgment seeking full resolution of this
matter, they will necessarily have to move on Plaintiffs’ PHL § 18 claim in addition
to Plaintiffs’ claims for a violation of GBL § 349 and unjust enrichment if the Court
of Appeals has not yet issued a decision in Ortiz. In other words, Defendants will
endure the financial burden of seeking summary judgment for a claim that could
end up being moot. In addition, this Court echoes the concerns of Judge Telesca
when granting the initial stay in this case of the possibility that the parties could
spend significant resources on trial preparation since this Court has already held
that PHL § 18(2)(e) applies to Verisma. (Sept. 6, 2018 D&O at 9, ECF No. 151.)
Accordingly, the second factor weighs in favor of staying the action.
With respect to the interest of the courts, the third factor to be considered,
Verisma argues that staying this matter pending a resolution of the PHL § 18
certified question in Ortiz will conserve judicial resources and avoid conflicting
decisions between different courts. (Verisma’s Mem. of Law at 9.) The Hospital
Defendants assert that a stay is warranted since judicial resources are being
utilized in Oritz to determine the same legal question at issue here. (Hosp. Defs.’
Mem. of Law at 3.) They argue that a stay would preserve those resources,
especially given the Hospital Defendant’s position that a determination on the
PHL claim in Ortiz “may be dispositive of this matter.” (Id.; Hosp. Defs.’ Reply
Mem. of Law at 3.) The Hospital Defendants further assert that since Ruzhinskaya
is “on all fours” with the present case, the Second Circuit will provide “critical
clarification for key issues regarding the law” on the three causes of action asserted

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by Plaintiffs. (Letter from Amanda B. Burns, Esq., (Jul. 9, 2020) at 1–2, ECF No.
191.) Verisma’s correspondence submitted after briefing on the motion to stay
based on Ortiz concluded also asserted that this matter should be stayed pending
the appeal in Ruzhinskaya, but only on the grounds that Ruzhinskaya could
provide this Court with guidance regarding the PHL § 18 claim. (Letter from
Christopher J. Belter, Esq. (Jul. 10, 2020), ECF No. 193.)
Plaintiffs counter with the argument that judicial resources will not be
conserved by a stay, but will just be paused until any stay is decided since their
claims under GBL § 349 and for unjust enrichment will remain regardless of the
decision in Ortiz. (Pls.’ Mem. of Law at 18; Pls.’ Resp. Mem. of Law at 4.) In
addition, Plaintiffs argue that Ruzhinskaya is not “on all fours” with the present
case because Plaintiffs have asserted that the Hospital Defendants received
sizeable kickbacks from Verisma. (Letter from Kathryn Lee Bruns, Esq., to the
Court (Jul. 9, 2020) at 1, ECF No. 192.)
The Court agrees with Defendants that this factor weighs in favor of a stay
because the Court of Appeals’ decision on the certified question in Ortiz could be
dispositive, at the very least, of one claim in this case. It would be a waste of judicial
resources for this Court to decide an issue that could soon be rendered moot or,
more troublesome, require the Court to reverse its decision if contrary to one
rendered in Ortiz. The Court finds that waiting for guidance from the Court of
Appeals (and the Second Circuit) regarding the application of PHL § 18 will
simplify the questions in this action, such that a stay is warranted. Estate of Heiser

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v. Deutsche Bank Trust Co. Americas, No. 11-CV-1608 (AJN)(MHD), 2012 WL
2865485 at *5 (S.D.N.Y. Jul. 10, 2012)), aff’d 2012 WL 5039065 (S.D.N.Y. Oct. 17,
2012) (“In recognition of the fact that the Second Circuit will likely be ruling on
legal issues potentially dispositive in this case, it is in the best interest of this court
to await the decision in the consolidated . . . appeals. Failure to do so could well
lead to unnecessary litigation that is time-consuming for this court, as well as for
any third parties that might be joined in this turnover proceeding.”); Catskill
Mountains Chapter of Trout Unlimited, Inc. v. U.S. E.P.A., 630 F. Supp. 2d 295,
304–05 (S.D.N.Y. 2009) (granting a stay of the action pending the outcome of an
11th Circuit case, “finding that while a decision will not necessarily be binding on
this Court, resolution of [another case may] guide this Court in ruling on . . . the
key issues in this litigation.”) (internal quotations and citations omitted); In re
Literary Works in Elec. Databases Copyright Litig., No. 00-CV-6049(GBD), 2001
WL 204212, at *3 (S.D.N.Y. Mar. 1, 2001) (granting motion to stay because
although “[a] decision in the [case] before the United States Supreme Court may
not settle every question of fact and law before this Court . . . in all likelihood it
will settle many and simplify them all.”) (internal quotations and citations
omitted). Based upon the above, the third factor weighs in favor of a stay.
The fourth factor the Court must consider — the interests of persons not
parties to the civil litigation — also weighs in favor of a stay. Verisma asserts that
a stay will provide guidance to non-parties because third-parties also have an
interest in “avoiding needless expenditures and promoting judicial economy.”

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(Verisma’s Mem. of Law at 10.) Verisma also contends that the stay could prevent
proceeding with class notice, which would require a third-party vendor to mail
class notices that identify patients and their last known address. (Id.) Verisma
argues that this will result in the disclosure of confidential information that could
be avoided if the stay is granted and ultimately Ortiz is decided in its favor. (Id. at
10–11.)
The Hospital Defendants make the same argument for this factor as they
made for the third factor, namely that a stay would preserve judicial resources
since another court is considering the PHL claim and that this is in the best
interests of non-parties. (Hosp. Defs.’ Mem. of Law at 3.) In particular, the Hospital
Defendants assert that a “speedy” resolution of this case is not in the public’s best
interest because it is subject to change pending the outcome in Ortiz. (Hosp. Defs.’
Reply Mem. of Law at 5.)
Plaintiffs, in turn, argue that a stay will prejudice thousands of non-parties,
inclusive of class members, with an interest in a quick resolution of the case. (Pls.’
Mem. of Law at 20; Pls.’ Resp. Mem. of Law at 4.) Further, Plaintiffs assert that a
stay would permit Verisma to continue its alleged practice of overcharging for
medical records. (Pls.’ Resp. Mem. of Law at 4.) Finally, Plaintiffs contend that
Verisma’s concern regarding the disclosure of confidential information is a “red
herring” because the Court has already granted Plaintiffs’ motion to send class
notice, to which class members are constitutionally entitled. (Pls.’ Mem. of Law at
20–21.)

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The Court agrees with Judge Telesca’s similar findings on the Hospital
Defendants’ prior motion to stay this matter pending a decision in Ruzhinskaya,
wherein he stated that “the interests of any possible nonparties to the litigation
would be better served by awaiting a decision in Ruzhinskaya, which will provide
invaluable guidance to the Court on key trial issues in this case.” (Sept. 6, 2018
D&O at 12, ECF No. 151.) The same logic applies here.
Finally, public interest, the fifth factor the Court must consider when
determining whether a stay is warranted, weighs in favor of a stay. In support of
this factor, Verisma asserts that a stay will benefit the public’s interest because a
resolution of whether there is a private right of action under PHL § 18 will permit
the public to better understand claims asserted under that statute. (Verisma’s
Mem. of Law at 11 .) In addition, Verisma repeats is argument that permitting this
case to go forward could result in incongruous decisions between the courts and
waste judicial resources. (Id.) The Hospital Defendants again argue that a stay
would preserve judicial resources since another court is considering the PHL claim
and that this is in the best interests of the public. (Hosp. Defs.’ Mem. of Law at 3;
Hosp. Defs.’ Reply Mem. of Law at 5.)
Plaintiffs contend that the public has an interest in the expeditious
resolution of matters and that, even if a stay is granted, the public will continue to
be injured by Verisma’s practice of overcharging patients for medical records. (Pls.’
Mem. of Law at 21.)

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The Court finds that this factor weighs in favor of a stay. Indeed, “[b]y
conserving judicial resources, a stay will serve not only the interest of the courts,
but also the interests of the Parties, the nonparties, and the public in an orderly
and efficient use of judicial resources.” Richard K. v. United BeHavioral Health,
No. 18-CV-6318(GHW)(BCM), 2019 WL 3083019, at *9 (S.D.N.Y. Jun. 28, 2019),
report and recommendation adopted, 2019 WL 3080849 (S.D.N.Y. Jul. 15, 2019)
(internal quotations and citations omitted).
On balance, the factors considered by the Court weigh in favor of staying
this action. However, the Court is cognizant that the stay depends on several
different factors, including the outcome in Ortiz and then, potentially, the
resolution in Ruzhinskaya, which could result in a lengthy stay. Accordingly, to
avoid an indefinite stay, the Court implements a stay until March 31, 2021, at
which time the Court can reevaluate the necessity and propriety of the stay.
Conclusion
Based upon the forgoing, Defendants’ motions to stay this action (ECF No.
169; ECF No. 171) are GRANTED to the extent that this case is stayed until
March 31, 2020.
______________________________
MARK W. PEDERSEN
United States Magistrate Judge
Dated:

October 27, 2020
Rochester, New York

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